An analysis of tax incentives for islamic home financing in Malaysia

Abstract

Obtaining an affordable home financing facility is among the critical issues that needs to be highlighted in house ownership and Islamic home financing is one of the options available in Malaysian housing market. In Malaysian context, Islamic home financing has been widely discussed from the perspectives of legal, cost, product structure but not much has been emphasized on the tax policies especially the tax incentives. This paper examines the tax incentives offered by the Malaysian government for the period from 2019 to 2023 on Islamic home financing. These periods were analysed to understand the most recent policy by the government to promote Islamic home financing as well as the Islamic finance industry in Malaysia. The study uses descriptive content analysis in examining relevant tax documents to examine the tax incentives for Islamic home financing in Malaysia. The findings concluded that Islamic home financing in Malaysia is not given the appropriate tax incentives to encourage bank customers to obtain Islamic home financing. Furthermore, the type of tax incentives given to Islamic home financing for the period from 2019 to 2023 are similar and focused more on the Stamp duty and Real Property Gains Tax. To fulfil the aspiration as the preferred Islamic financial hub, more attractive tax incentives should be offered by the government to promote Islamic home financing which will benefit the Islamic finance industry as well. Despite the importance of Islamic home financing in the society, very few studies have attempted to highlight this issue as compared to other tax incentives in the Malaysian tax system which suggests an opportunity for researchers to explore this area.